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1、Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549 FORM 20-F (Mark One)REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)OR(g)OF THE SECURITIES ACT OF 1934OR ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
2、December 31,2022OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF1934For the transition period from to OR SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGEACT OF 1934Date of event requiring this shell company report Commission file num
3、ber:001-39316 Burning Rock Biotech Limited(Exact name of Registrant as specified in its charter)N/A(Translation of Registrants name into English)Cayman Islands(Jurisdiction of incorporation or organization)No.5,Xingdao Ring Road North,International Bio Island,Guangzhou,510005The Peoples Republic of
4、China(Address of principal executive offices)Mr.Leo Li,Chief Financial OfficerTelephone:+86 020-3403 7871 Email:No.5,Xingdao Ring Road North,International Bio Island,Guangzhou,510005The Peoples Republic of China(Name,Telephone,E-mail and/or Facsimile number and Address of Company Contact Person)Secu
5、rities registered or to be registered,pursuant to Section 12(b)of the Act.Title of each class TradingSymbol Name of each exchangeon which registeredAmerican depositary shares,each representingone Class A ordinary share BNR The Nasdaq Stock Market LLC(The Nasdaq Global Market)Class A ordinary share,p
6、ar value US$0.0002per share*The Nasdaq Stock Market LLC(The Nasdaq Global Market)American depositary shares,each representingone Class A ordinary share BNR London Stock Exchange(The Main Market)*Not for trading,but only in connection with the listing of the Nasdaq Global Market of American depositar
7、y shares.Securities registered or to be registered pursuant to Section 12(g)of the Act.None(Title of Class)Securities for which there is a reporting obligation pursuant to Section 15(d)of the Act.None(Title of Class)Indicate the number of issued and outstanding shares of each of the issuers classes
8、of capital or common stock as of the close of the period covered bythe annual report:85,318,596 Class A ordinary shares(excluding(i)the 473,404 Class A ordinary shares issued to the depositary bank for bulk issuanceof ADSs reserved for future issuances upon the exercise or vesting of awards granted
9、under share incentive plans,and(ii)3,023,138 Class A OrdinaryShares as treasury stock)and 17,324,848 Class B ordinary shares,par value US$0.0002 per share,as of December 31,2022.Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes
10、NoIf this report is an annual or transition report,indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of theSecurities Exchange Act of 1934.Yes NoNote Checking the box above will not relieve any registrant required to file reports pursuant to Sect
11、ion 13 or 15(d)of the Securities Exchange Act of1934 from their obligations under those Sections.Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934during the preceding 12 months(or for such shorter p
12、eriod that the registrant was required to file such reports),and(2)has been subject to such filingrequirements for the past 90 days.Yes NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation
13、S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit suchfiles).Yes NoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or an emerging growth company.See
14、the definitions of“large accelerated filer,”“accelerated filer,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Emerging growth company If an emerging growth company that prepares its financial statements in accordance wit
15、h U.S.GAAP,indicate by check mark if the registrant has electednot to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)ofthe Exchange Act.The term“new or revised financial accounting standard”refers to any updat
16、e issued by the Financial Accounting Standards Board to itsAccounting Standards Codification after April 5,2012.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internalcontrol over financial reporting under
17、 Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accountant firm thatprepared or issued its audit report.Yes NoIf securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in thefi
18、ling reflect the correction of an error to previously issued financial statements.Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensationreceived by any of the registrants executive officers during the relevant
19、recovery period pursuant to 240.10D-1(b).Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:U.S.GAAP International Financial Reporting Standards as issued by the International Accounting Standards Board Other If“Other”
20、has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected tofollow.Item 17 Item 18If this is an annual report,indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the ExchangeAct).Yes
21、 No(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12,13 or 15(d)of the SecuritiesExchange Act of 1934 subsequent to the distribution of securi
22、ties under a plan confirmed by a court.Yes No Table of ContentsTABLE OF CONTENTS PART I 1 ITEM 1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERS 1 ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE 1 ITEM 3.KEY INFORMATION 1 ITEM 4.INFORMATION ON THE COMPANY 50 ITEM 4A.UNSOLVED STAFF COMMENTS 85 IT
23、EM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS 85 ITEM 6.DIRECTORS,SENIOR MANANGEMENT AND EMPLOYEES 104 ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 113 ITEM 8.FINANCIAL INFORMATION 114 ITEM 9.THE OFFER AND LISTING 115 ITEM 10.ADDITIONAL INFORMATION 115 ITEM 11.QUALITATIVE AND QUANTIT
24、ATIVE DISCLOSURES ABOUT MARKET RISK 130 ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 131 PART II 132 ITEM 13.DEFAULTS,DIVIDEND ARREARAGES AND DELINQUENCIES 132 ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 133 ITEM 15.CONTROLS AND PROCEDURES 1
25、33 ITEM 15A.AUDIT COMMITTEE FINANCIAL EXPERT 134 ITEM 15B.CODE OF ETHICS 134 ITEM 15C.PRINCIPAL ACCOUNTANT FEES AND SERVICES 134 ITEM 15D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 134 ITEM 15E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 134 ITEM 15F.CHANGE
26、 IN REGISTRANTS CERTIFYING ACCOUNTANT 135 ITEM 15G.CORPORATE GOVERNANCE 135 ITEM 15H.MINE SAFETY DISCLOSURE 135 ITEM 15I.DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENT INSPECTIONS 135 PART III 135 ITEM 16.FINANCIAL STATEMENTS 135 ITEM 17.FINANCIAL STATEMENTS 136 ITEM 18.EXHIBITS 136 iTable o
27、f ContentsCONVENTIONS THAT APPLY TO THIS ANNUAL REPORT ON FORM 20-FUnless otherwise indicated and except where the context otherwise requires,references in this annual report on Form 20-F to:“ADSs”refer to American depositary shares,each of which represents one Class A ordinary share;“Burning Rock,”
28、“we,”“us,”“our company”and“our”refer to Burning Rock Biotech Limited,a Cayman Islands exempted company,andits subsidiaries and consolidated affiliated entities;“China”or“the PRC”refers to the Peoples Republic of China,including Hong Kong and Macau;the only instances in which“China”or“the PRC”do not
29、include Hong Kong or Macau are when used in the case of laws and regulations adopted by the Peoples Republic ofChina;the legal and operational risks associated with operating in China also apply to our operations in Hong Kong;“liquid biopsy”refers to a test done on a blood sample that enables the ac
30、cess to the molecular information,by looking for cancer cellsfrom a tumor that are circulating in the blood or for pieces of DNA from tumor cells that are in the blood,throughout all stages of cancer;“MRD”refers to minimal residual disease,a small number of cancer cells left in the body after treatm
31、ent;“NGS”refers to next-generation sequencing,a DNA sequencing technology used to determine the nucleotide sequence of an individualsgenome;“RMB”or“Renminbi”refers to the legal currency of China;“sensitivity”refers to the percentage of people who test positive for a specific disease or condition amo
32、ng people who actually have thedisease or condition;“shares”or“ordinary shares”refer to our Class A and Class B ordinary shares,par value US$0.0002 per share;“specificity”refers to the percentage of people who test negative for a specific disease or condition among people who do not have thedisease
33、or condition;“U.S.GAAP”refers to accounting principles generally accepted in the U.S.;“US$,”“U.S.dollars,”“$,”and“dollars”refer to the legal currency of the U.S;and “the VIE”refers to our PRC variable interest entity,Burning Rock(Beijing)Biotechnology Co.Ltd.Our reporting currency is the Renminbi.Th
34、is annual report also contains translations of certain foreign currency amounts into U.S.dollars for theconvenience of the reader.Unless otherwise stated,all translations from Renminbi to U.S.dollars were made at a rate of RMB6.8972 to US$1.00,theexchange rate set forth in the H.10 statistical relea
35、se of the Board of Governors of the Federal Reserve System on December 30,2022.We make norepresentation that any Renminbi or U.S.dollar amounts referred to in this annual report could have been or could be converted into U.S.dollars orRenminbi,as the case may be,at any particular rate,or at all.On A
36、pril 14,2023,the exchange rate set forth in the H.10 statistical release of the FederalReserve Board was RMB6.8960 to US$1.00.All of our share related numbers contained in this annual report,including but not limited to the numbers of authorized,issued and outstandingshares,have retroactively reflec
37、ted the 2-for-1 reverse share split that we effected in January 2020.iiTable of ContentsFORWARD-LOOKING STATEMENTSThis annual report on Form 20-F contains statements of a forward-looking nature.All statements other than statements of current or historicalfacts are forward-looking statements.These fo
38、rward-looking statements are made under the“safe harbor”provision under Section 21E of the SecuritiesExchange Act of 1934,as amended,or the Exchange Act,and as defined in the Private Securities Litigation Reform Act of 1995.These statementsinvolve known and unknown risks,uncertainties and other fact
39、ors that may cause our actual results,performance or achievements to be materiallydifferent from those expressed or implied by the forward-looking statements.You can identify these forward-looking statements by words or phrases such as“may,”“will,”“expect,”“anticipate,”“aim,”“estimate,”“intend,”“pla
40、n,”“believe,”“likely to”or other similar expressions.We have based these forward-looking statements largely on our current expectations andprojections about future events and financial trends that we believe may affect our financial condition,results of operations,business strategy andfinancial need
41、s.These forward-looking statements include,but are not limited to,statements about:our mission and strategies;trends and competition in Chinas cancer genotyping industry;our expectations regarding demand for and market acceptance of our NGS-based products and services and our ability to expand ourcu
42、stomer base;our ability to obtain and maintain intellectual property protections for our cancer therapy selection technologies and our continued researchand development to keep pace with technology developments;our ability to obtain and maintain regulatory approvals from the NMPA,the NCCL and have o
43、ur laboratory certified or accredited byauthorities including the CLIA and the CAP;our future business development,financial condition and results of operations;our ability to obtain financing cost-effectively;potential changes of government regulations,regardless of whether they are directly relate
44、d to our industry;our ability to hire and maintain key personnel;global or national health concerns,including the outbreak of pandemic or contagious diseases such as the pandemic of COVID-19;our relationship with our major business partners and customers;and general economic and business conditions
45、in China and elsewhere.You should read these statements in conjunction with the risks disclosed in“Item 3.Key InformationD.Risk Factors”of this annual report andother risks outlined in our other filings with the Securities and Exchange Commission,or the SEC.Moreover,we operate in an emerging and evo
46、lvingenvironment.New risks may emerge from time to time,and it is not possible for our management to predict all risks,nor can we assess the impact ofsuch risks on our business or the extent to which any risk,or combination of risks,may cause actual results to differ materially from those contained
47、inany forward-looking statements.The forward-looking statements made in this annual report relate only to events or information as of the date on whichthe statements are made in this annual report.Except as required by law,we undertake no obligation to update any forward-looking statements to reflec
48、tevents or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.You should read this annualreport and the documents that we have referred to in this annual report,completely and with the understanding that our actual future results may be
49、materially different from what we expect.iiiTable of ContentsPART IITEM 1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONRisks Associated with Being Based in or Having the Majority of the Operation
50、s in ChinaAs we mainly conduct our business in China,we may be subject to PRC laws relating to,among others,data security and restrictions over foreigninvestments in scientific research and technical services and other industry sectors set out in the Special Administrative Measures(Negative List)for
51、 theAccess of Foreign Investment(2021 Edition),or the Negative List(2021 Edition).Specifically,we may be subject to PRC laws relating to thecollection,use,sharing,retention security,and transfer of confidential and private information,such as personal information and other data.These PRClaws apply n
52、ot only to third-party transactions,but also to transfers of information between us and our wholly foreign-owned enterprises in China,andother parties with which we have commercial relations.These PRC laws and their interpretations and enforcement continue to develop and are subject tochange,and the
53、 PRC government may adopt other rules and restrictions in the future.We are exposed to legal and operational risks associated with our operations in China.The PRC government has significant authority to exertinfluence on the ability of a company with operations in China,including us,to conduct its b
54、usiness.Changes in Chinas economic,political or socialconditions or government policies could materially and adversely affect our business and results of operations.We are subject to risks due to theuncertainty of the interpretation and the application of the PRC laws and regulations,including but n
55、ot limited to the risks of uncertainty about anyfuture actions of the PRC government on U.S.listed companies.We may also be subject to sanctions imposed by PRC regulatory agencies,including theChina Securities Regulatory Commission(the“CSRC”),if we fail to comply with their rules and regulations.Any
56、 actions by the PRC government toexert more oversight and control over offerings that are conducted overseas and/or foreign investment in companies having operations in China,including us,could significantly limit or completely hinder our ability to offer or continue to offer securities to investors
57、,and cause the value of oursecurities to significantly decline or become worthless.These China-related risks could result in a material change in our operations and/or the value ofour securities,or could significantly limit or completely hinder our ability to offer securities to investors in the fut
58、ure and cause the value of suchsecurities to significantly decline or become worthless.The PRC government may exert,at any time,substantial intervention and influence over the manner of our operations.Recently,the PRCgovernment initiated a series of regulatory actions and statements to regulate busi
59、ness operations in China with little advance notice,including crackingdown on illegal activities in the securities market,enhancing supervision over China-based companies listed overseas,adopting new measures to extendthe scope of cybersecurity reviews and new laws and regulations related to data se
60、curity,and expanding the efforts in anti-monopoly enforcement.On December 28,2021,the CAC,and 12 other departments jointly promulgated the newly revised Measures for Cybersecurity Review with effectfrom February 15,2022(“Measures”),which provides that(i)a critical information infrastructure operator
61、(“CIIO”)which intends to purchase networkproducts and services shall prejudge the possible risks to national security that may arise after the products and services are put into use and wherenational security will or may be affected,the operator shall apply with the Cybersecurity Review Office for c
62、ybersecurity review,and(ii)a networkplatform operator(“NPO”)that possesses more than one million users personal information must apply for cybersecurity review before listing in aforeign country.On November 14,2021,the CAC publicly solicited opinions on the Regulations on the Administration of Cyber
63、 Data Security(Draft forComments)which expanded the scope of application of cybersecurity review,established the data classified and categorized protection system,anddefined the relevant rules for cross-border security management of data.It provides that data processors carrying out the following ac
64、tivities shall applyfor cybersecurity review:(i)merger,reorganization or division of Internet platform operators that gather and possess a large number of data resourceshaving bearing on the national security,economic development or public interests,which affects or may affect national security;(ii)
65、listing in a foreigncountry of a data processor that processes the personal information of more than one million persons;(iii)listing in Hong Kong of a data processor,which affects or may affect national security;and(iv)other data processing activities that affect or may affect national security.1Ta
66、ble of ContentsAccording to the above provisions,we will be subject to cybersecurity review if we are identified as a CIIO that procures network products orservices which affect or may affect national security after being put into use or NPO that conducts data processing activities which affect or m
67、ay affectnational security,or we have more than one million users personal information and plans to be listed abroad.We and our PRC legal counsel,Tian Yuan Law Firm,are of the view that,as of the date of this annual report,the possibility that we becomeidentified as a CIIO or NPO and accordingly wou
68、ld be subject to the cybersecurity review pursuant to the relevant regulations and policies that havebeen issued by the CAC is relatively low,due to the following reasons:(i).we have not received any CIIO identification notice as of the date of this annual report,which is required to be issued in a
69、timely mannerby competent departments responsible for the security protection work of critical information infrastructures after they have organized theCIIO identification in the industry in accordance with the Regulations on the Security Protection of Critical Information Infrastructures;(ii).NPO i
70、s not defined in the Measures and even if a company has been identified as NPO,whether such a company needs to be subject tocybersecurity review depends on whether its data processing activities will“affect or may affect national security.”As of the date of thisannual report,we have not experienced
71、any major information security incident in relation to the theft,leakage,damage,illegal use orillegal export of data or personal information.In addition,all the user data collected by us in business operation are stored in mainlandChina;(iii).We process no more than one million users personal inform
72、ation;and (iv).However,according to article 16 of the Measures,the member unit of the cybersecurity review work mechanism(the“CybersecurityMember Unit”)has the right to initiate review on network products and services and data processing activities that it deems as“affect ormay affect national secur
73、ity”at its own discretion.If the Cybersecurity Member Unit decides to take a cybersecurity review on us and wefail such review,it could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and causethe value of our securities to significantly dec
74、line or become worthless.Currently,the cybersecurity laws and regulations have not directly affected our business and operations,but in anticipation of the strengthenedimplementation of cybersecurity laws and regulations and the expansion of our business,we face potential risks if we are deemed as a
75、 CIIO underapplicable laws.In such case,we must fulfill certain obligations as required under the Cybersecurity Law and other applicable laws,including,amongothers,storing personal information and important data collected and produced within the PRC territory during our operations in China,which we
76、arealready doing in our business,and we may be subject to review when purchasing internet products and services.As the amended Measures forCybersecurity Review took effect in February 2022,we may be subject to review when conducting data processing activities,and may face challengesin addressing its
77、 requirements and make necessary changes to our internal policies and practices in data processing.As of the date of this annual report,we have not been involved in any investigations on cybersecurity review made by the CAC on such basis,and we have not received any inquiry,notice,warning,or sanctio
78、ns in such respect.Based on the foregoing,we and our PRC legal counsel,Tian Yuan Law Firm,do not expect that,as of the date ofthis annual report,the current applicable PRC laws on cybersecurity would have a material adverse impact on our business.After consulting with ourPRC legal counsel,Tian Yuan
79、Law Firm,we believe that we are in compliance with regulations or policies that have been issued by the CAC as of thedate of this annual report in all material aspects,on the following bases:(i)we have set up internal cybersecurity regulations,including data backup andrecovery measures and disaster
80、recovery measures;(ii)we have completed the Grade III information security protection filing as required by therelevant regulations and policies issued by relevant authorities;(iii)we inform our users and obtain their consent before collecting their personalinformation;(iv)we store relevant informat
81、ion in our own servers within the PRC;(v)we have not been investigated or received any request from anyCAC authorities as of the date of this annual report;(vi)we have not been subject to any administrative penalties regarding cybersecurity or datasecurity issues as of the date of this annual report
82、;and(vii)we have not been a party to any litigation or arbitration regarding with cybersecurity or datasecurity issues as of the date of this annual report.As advised by Tian Yuan Law Firm,our PRC counsel,as of the date of this annual report,we are notsubject to any cybersecurity review under the cy
83、bersecurity laws and regulations.On September 1,2021,the PRC Data Security Law became effective,which imposes data security and privacy obligations on entities andindividuals conducting data-related activities,and introduces a data classification and hierarchical protection system based on the impor
84、tance of data ineconomic and social development,as well as the degree of harm it will cause to national security,public interests,or legitimate rights and interests ofindividuals or organizations when such data is tampered with,destroyed,leaked,or illegally acquired or used.As of the date of this an
85、nual report,wehave not been involved in any investigations on data security compliance made in connection with the PRC Data Security Law,and we have notreceived any inquiry,notice,warning,or sanctions in such respect.Based on the foregoing,we do not expect that,as of the date of this annual report,t
86、hePRC Data Security Law would have a material adverse impact on our business.2Table of ContentsOn July 6,2021,the relevant PRC governmental authorities published the Opinions on Strictly Cracking Down Illegal Securities Activities inAccordance with the Law.These opinions emphasized the need to stren
87、gthen the administration over illegal securities activities and the supervision onoverseas listings by China-based companies and proposed to take effective measures,such as promoting the construction of relevant regulatory systemsto deal with the risks and incidents faced by China-based overseas-lis
88、ted companies.As these opinions were recently issued,official guidance andrelated implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage.As of the date of this annualreport,we have not received any inquiry,notice,warning,or sanctions from
89、 the CSRC or any other PRC government authorities.Based on the foregoingand the currently effective PRC laws,we and our PRC legal counsel,Tian Yuan Law Firm,are of the view that,as of the date of this annual report,theseopinions do not have a material adverse impact on our business.On February 17,20
90、23,the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by DomesticCompanies and five related guidelines,collectively,the Overseas Listing Trial Measures,which became effective on March 31,2023.The OverseasListing Trial Measures regulate both direct and
91、indirect overseas offering and listing of PRC domestic companies securities by adopting a filing-basedregulatory regime.Pursuant to the Overseas Listing Trial Measures,initial public offering or listings in overseas markets shall be filed with the CSRCwithin three working days after the relevant app
92、lication is submitted overseas.Furthermore,it is stipulated,among others,that an overseas offering andlisting shall be prohibited under any of the following circumstances:(i)where such securities offering and listing is explicitly prohibited by provisions inlaws,administrative regulations and releva
93、nt state rules;(ii)where the intended securities offering and listing may endanger national security asreviewed and determined by competent authorities under the State Council in accordance with law;(iii)where the PRC domestic company intending tomake the securities offering and listing,or its contr
94、olling shareholders and the actual controller,have committed crimes such as corruption,bribery,embezzlement,misappropriation or property or undermining the order of the socialist market economy during the last three years;(iv)where the PRCdomestic company intending to make the securities offering an
95、d listing is suspected of committing crimes or major violations of laws and regulations,and is under investigation according to law,and no conclusion has been made thereof;(v)where there are material ownership disputes over equity heldby the PRC domestic companys controlling shareholder or by other
96、shareholders that are controlled by the controlling shareholder and/or actualcontroller.The Overseas Listing Trial Measures also provide that any overseas offering and listing made by an issuer that meets both the followingconditions will be determined as indirect overseas offering and listing of PR
97、C domestic companies:(i)50%or more of the issuers operating revenue,total profit,total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted forby PRC domestic companies;and(ii)the main parts of the issuers business activ
98、ities are conducted in mainland China,or its main places of businessare located mainland China,or the senior management personal in charge of its business operation and management are mostly Chinses citizens ordomiciled in mainland China.On February 17,2023,the CSRC issued the Notice on the Administ
99、rative Arrangements for the Filing of OverseasListings by Domestic Enterprises.The CSRC clarified that on March 31,2023,the effective date of the Overseas Listing Trial Measures,the PRCdomestic companies that have been listed overseas by March 31,2023 are not required to file immediately,and filing
100、should be made as required if theyinvolve refinancing and other filing matters.As the requirements under Overseas Listing Trial Measures are new and evolving,there remains substantialuncertainties as to their interpretation and implementation and how they may impact our ability to raise or utilize f
101、und and business operation.Inparticular,there are uncertainties as to the form and substance of regulatory requirements and we cannot assure you that,when required,we cancomplete the requisite filing with such form and content satisfactory to the relevant regulators in a timely manner.Any delays in
102、completing the filingrequirements may adversely affect our ability to complete our capital raising activities from the capital markets in the future.Since these statements and regulatory actions are new,it is highly uncertain how soon legislative or administrative regulation making bodies willrespon
103、d and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated,if any,and thepotential impact such modified or new laws and regulations will have on our daily business operation,our ability to accept foreign investments andconduct follo
104、w-on offerings,and listing or continuing listing on a U.S.or other foreign exchanges.In addition,the PRC government has recentlypublished new policies that significantly affected certain industries such as the education and internet industries,and we cannot rule out the possibilitythat it will in th
105、e future release regulations or policies regarding any other industry including the industry in which we operate,which could adverselyaffect our business,financial condition and results of operations.3Table of ContentsRisks Associated with Our Corporate StructureBurning Rock Biotech Limited,our ulti
106、mate Cayman Islands holding company,does not have any substantive operations other than directlycontrolling Beijing Burning Rock Biotech Limited,our wholly foreign owned entity,or WFOE,and indirectly Burning Rock(Beijing)BiotechnologyCo.,Ltd.,the variable interest entity,or VIE,through certain contr
107、actual arrangements.These contractual arrangements were amended and restated inOctober 2019.See“Item 4.Information on the CompanyC.Organizational StructureContractual Arrangements.”What the ADSs investorspurchased are equity securities of our ultimate Cayman Islands holding company rather than equit
108、y securities of the VIE.We conduct our businessoperations through both the consolidated subsidiaries,and the VIE and the VIEs subsidiaries.We,together with the VIE and its subsidiaries,are subjectto PRC laws relating to,among others,restrictions over foreign investments in distribution of online inf
109、ormation and other value-addedtelecommunication services set out in the Negative List(2021 Edition)promulgated by the Ministry of Commerce,or MOFCOM,and the NationalDevelopment and Reform Commission,or NDRC.As a result,we have control over the VIE and its subsidiaries through contractual arrangement
110、s.TheVIE structure is used to replicate foreign investment in China-based companies where the PRC law prohibits direct foreign investment in the operatingcompanies.Neither we nor our subsidiaries own any share in the VIE or any of its subsidiaries.Instead,we control and receive the economic benefits
111、 ofthe business operation of the VIE or any of its subsidiaries through a series of contractual agreements with the VIE.The contractual agreements with theVIE are designed to provide the WFOE with the power,rights,and obligations equivalent in all material respects to those it would possess as thepr
112、incipal equity holder of the VIE,including absolute control rights and the rights to the assets,property,and revenue of the VIE and its subsidiaries.Asa result of our direct ownership in the WFOE and the contractual agreements with the VIE,we are regarded as the primary beneficiary of the VIE and it
113、ssubsidiaries.Because of our corporate structure,we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws andregulations,including but not limited to limitation on foreign ownership of internet technology companies,and regulatory review of oversea listing
114、ofPRC companies through a special purpose vehicle,and the validity and enforcement of the contractual agreements.We are also subject to the risks ofuncertainty about any future actions of the PRC government in this regard.Our contractual agreements may not be effective in providing control overthe V
115、IE and its subsidiaries.We may also subject to sanctions imposed by PRC regulatory agencies including CSRC if we fail to comply with their rulesand regulations.We and the VIE and its subsidiaries face various legal and operational risks and uncertainties related to being based in and having signific
116、antoperations in China.The PRC government has significant authority to exert influence on the ability of a China-based company,such as us and the VIEand its subsidiaries,to conduct its business,accept foreign investments or list on U.S.or other foreign exchanges.For example,we and the VIE and itssub
117、sidiaries face risks associated with regulatory approvals of offshore offerings,oversight on cybersecurity and data privacy.Such risks could result ina material change in our operations and/or the value of the ADSs or could significantly limit or completely hinder our ability to offer ADSs and/or ot
118、hersecurities to investors and cause the value of such securities to significantly decline or be worthless.The PRC government also has significant discretionover the conduct of the business of us and the VIE and its subsidiaries and may intervene with or influence our operations as it deems appropri
119、ate tofurther regulatory,political and societal goals.Furthermore,the PRC government has recently indicated an intent to exert more oversight and controlover overseas securities offerings and foreign investment in China-based companies like us.Any such action,once taken by the PRC government,couldsi
120、gnificantly limit or completely hinder our ability to offer securities to investors and cause the value of such securities to significantly decline or inextreme cases,become worthless.As used in this annual report,“we,”“us,”“our company,”“our,”or“the Company”refers to Burning Rock Biotech Limited an
121、d its subsidiaries,“the VIE”refers to our PRC variable interest entity,Burning Rock(Beijing)Biotechnology Co.Ltd.For more information on risks related to our corporate structure,see“D.Risk FactorsRisks Relating to Our Corporate Structure.”For moreinformation on the requisite permissions and approval
122、s for our business and the consequences in relation to failure to obtain the same,see“D.RiskFactorsRisks Relating to Government Regulations.”Permissions Required from the PRC AuthoritiesWe conduct our business in China primarily through our subsidiaries in China and the VIE and its subsidiaries.Our
123、operation and the operation ofthe VIE and its subsidiaries are governed by PRC laws and regulations.Save as otherwise disclosed in“D.Risk FactorsRisks Relating toGovernment Regulations”,as of the date of this annual report,our PRC subsidiaries and the VIE and its subsidiaries have obtained the requi
124、site licensesand permits from the PRC government authorities that are material for their business operations in China.If we,the VIE,or any of its subsidiaries fail toobtain or maintain such licenses or permits,the relevant PRC regulatory authorities would have broad discretion in dealing with such v
125、iolations orfailures,including imposing fines,confiscating our incomes and products that are deemed to have been obtained through illegal operations,anddiscontinuing or restricting our operations.As of the date of this annual report,none of us,the VIE,or any of its subsidiaries have been subject to
126、anypenalties from the relevant authorities for failure to obtain or maintain any required licenses or permits.Given the uncertainties of interpretation andimplementation of relevant laws and regulations and the enforcement practice by government authorities,we cannot assure you that we are able toma
127、intain our existing licenses and permits or obtain additional licenses,permits,filings or approvals for providing our products and services in thefuture.See“D.Risk FactorsRisks Relating to Our Business and IndustryWe are subject to extensive legal and regulatory requirements in Chinafor our NGS-base
128、d products and services.Any lack of requisite certificates,licenses or permits applicable to our business may have an adverse impacton our business,financial condition and results of operations.”4Table of ContentsRisks Associated with the Holding Foreign Companies Accountable ActPursuant to the U.S.
129、Holding Foreign Companies Accountable Act,or the HFCA Act,if the SEC determines that we have filed audit reportsissued by a registered public accounting firm that has not been subject to inspection by the PCAOB for two consecutive years,the SEC will prohibit oursecurities,including our ADSs,from bei
130、ng traded on a U.S.national securities exchange,including the Nasdaq,or in the over-the-counter tradingmarket in the U.S.On December 16,2021,the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect orinvestigate completely registered public accounting fir
131、ms headquartered in mainland China and Hong Kong,including our auditor.In May 2022,theSEC conclusively listed us as a Commission-Identified Issuer under the HFCA Act following the filing of our annual report on Form 20-F for the fiscalyear ended December 31,2021.On December 15,2022,the PCAOB issued
132、a report that vacated its previous determination issued on December 16,2021 and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered publicaccounting firms.For this reason,we do not expect to be identified as a Commiss
133、ion Identified Issuer under the HFCA Act after we file this annualreport on Form 20-F.Each year,the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong,amongother jurisdictions.If the PCAOB determines in the future that it no longer has
134、full access to inspect and investigate completely accounting firms inmainland China and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financialstatements filed with the SEC,we would again be identified as a Commission Identified I
135、ssuer following the filing of the annual report on Form 20-F forthe relevant fiscal year.There can be no assurance that we would not be identified as a Commission Identified Issuer for any future fiscal year,and if wewere so identified for two consecutive years,we would become subject to the prohibi
136、tion on trading under the HFCA Act.See“Item 3.D.KeyInformationRisk FactorsRisks Related to Doing Business in the PRCThe PCAOB had historically been unable to inspect our auditor in relationto their audit work performed for our financial statements and the inability of the PCAOB to conduct inspection
137、s of our auditor in the past has deprivedour investors with the benefits of such inspections”and“Our ADSs may be prohibited from trading in the United States under the HFCA Act in thefuture if the PCAOB is unable to inspect or investigate completely our current auditor.The delisting of the ADSs,or t
138、he threat of their being delisted,may materially and adversely affect the value of your investment.”5Table of ContentsResults of Operations,Financial Position and Cash Flows of the VIE and Its SubsidiariesThe tables below set forth the results of operations of the VIE and subsidiaries of the VIE inc
139、luded in our consolidated statements ofcomprehensive loss for 2020,2021 and 2022:For the years ended December 31,2020 Non-VIE entities VIE and VIEs subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Revenues 65,312 432,142 (67,551)429,903 Net loss 161,059 244,765 1,411 407,235 For the year
140、s ended December 31,2021 Non-VIE entities VIE and VIEs subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Revenues 77,234 526,071 (95,443)507,862 Net loss 277,034 508,803 10,860 796,697 For the years ended December 31,2022 Non-VIE entities VIE and VIEs subsidiaries Eliminations Consolidate
141、d Total Consolidated Total RMB RMB RMB RMB US$Revenues 186,658 557,667 (181,087)563,238 81,662 Net loss 370,725 605,934 (5,426)971,233 140,815 The tables below set forth the condensed consolidated schedule of financial position of the VIE and subsidiaries of the VIE as of the datesindicated:As of De
142、cember 31,2021 Non-VIE entities VIE and VIEs subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Cash and cash equivalents 1,245,467 185,850 1,431,317 Restricted cash 7,795 7,795 Inter-company receivables 897,633 75,560 (973,193)Total current assets 2,237,927 556,212 (973,193)1,820,946 Tota
143、l non-current assets 354,409 103,232 457,641 Total assets 2,592,336 659,444 (973,193)2,278,587 Inter-company payables 631,582 897,633 (1,529,215)Total liabilities 747,025 1,215,466 (1,529,215)433,276 Total shareholders(deficit)equity 1,845,311 (556,022)556,022 1,845,311 Total liabilities,mezzanine e
144、quity and shareholders(deficit)equity 2,592,336 659,444 (973,193)2,278,587 As of December 31,2022 Non-VIE entities VIE and VIEs subsidiaries Eliminations Consolidated Total Consolidated Total RMB RMB RMB RMB US$Cash and cash equivalents 528,716 376,735 905,451 131,278 Restricted cash 9,540 10,277 19
145、,817 2,873 Inter-company receivables 1,601,116 245,391 (1,846,507)Total current assets 2,187,606 917,663 (1,846,507)1,258,762 182,504 Total non-current assets 230,109 98,596 328,705 47,658 Total assets 2,417,715 1,016,259 (1,846,507)1,587,467 230,162 6Table of Contents As of December 31,2022 Non-VIE
146、 entities VIE and VIEs subsidiaries Eliminations Consolidated Total Consolidated Total RMB RMB RMB RMB US$Inter-company payables 1,127,041 1,601,116 (2,728,157)Total liabilities 1,259,374 1,897,909 (2,728,157)429,126 62,218 Total shareholders(deficit)equity 1,158,341 (881,650)881,650 1,158,341 167,9
147、44 Total liabilities,mezzanine equity and shareholders(deficit)equity 2,417,715 1,016,259 (1,846,507)1,587,467 230,162 The tables below set forth the cash flows of the VIE and subsidiaries of the VIE included in our consolidated statements of cash flows for 2020,2021 and 2022:For the years ended Dec
148、ember 31,2020 Non-VIE entities VIE and VIEs subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Net cash(used in)generated from operating activities (232,106)158,563 (73,543)Net cash used in investing activities (99,517)(9,795)(109,312)Net cash generated from(used in)financing activities 2,
149、196,599 (30,880)2,165,719 For the years ended December 31,2021 Non-VIE entities VIE and VIEs subsidiaries Eliminations Consolidated Total RMB RMB RMB RMB Net cash used in operating activities (220,380)(257,506)(477,886)Net cash(used in)generated from investing activities (222,038)(11,265)315,000 81,
150、697 Net cash(used in)generated from financing activities (42,522)304,623 (315,000)(52,899)For the years ended December 31,2022 Non-VIE entities VIE and VIEs subsidiaries Eliminations Consolidated Total Consolidated Total RMB RMB RMB RMB US$Net cash used in operating activities (317,427)(139,381)(456
151、,808)(66,232)Net cash(used in)generated from investing activities 29,625 (37,088)(7,463)(1,082)Net cash(used in)generated from financing activities (83,868)377,630 (380,000)(86,238)(12,504)The typical structure of cash flows through our organization is as follows:(i)we transfer funds to our WFOE,Bei
152、jing Burning Rock BiotechLimited,through either capital contributions or loans from our Hong Kong subsidiary,BR Hong Kong Limited;(ii)our WFOE makes loans to the VIE,Burning Rock(Beijing)Biotechnology Co.Ltd.;(iii)the VIE and its subsidiaries receive funds generated from sales of products and/or ser
153、vices to thirdparty customers;and(iv)when the VIE intends to settle any amounts owed to us under the VIE Agreements,the VIE will pay service fees to our WFOEpursuant to the exclusive business cooperation agreement,and our WFOE will transfer funds to BR Hong Kong Limited,which in turn will transferfu
154、nds to us,all through distributions,dividends or repayment of shareholder loans.As of the date of this annual report,none of our PRC subsidiaries norVIE has declared or paid any dividends or made any distributions to their respective holding companies,including Burning Rock Biotech Limited,nordoes a
155、ny of them have intention to do so.As of the date of this annual report,as the VIE has been loss making,it has not settled any amounts owed to usunder the VIE Agreements and does not have the intention to do so.As of the date of this annual report,Burning Rock Biotech Limited has not declaredany div
156、idend and does not have a plan to declare a dividend to its shareholders.Nevertheless,cash transfers have been made to date between BurningRock Biotech Limited,our subsidiaries and the VIE and its subsidiaries and such cash transfers have been made both in the direction to the VIE andfrom the VIE to
157、 our WFOE as of the date of annual report.We currently do not have cash management policies that dictate when or how funds aretransferred between us,our subsidiaries and the VIE and its subsidiaries.In practice,we estimate and allocate funds to our WFOE and the VIE and theVIEs subsidiaries based on
158、their respective available cash balances and forecasted cash requirements.7Table of ContentsThere are limitations on foreign exchange and our ability to transfer cash among us,our subsidiaries(including our WFOE)and the VIE and theVIEs subsidies,and to transfer funds across borders and to the U.S.in
159、vestors.There is no assurance that the PRC government will not intervene orimpose restrictions on the ability of us,our subsidiaries and the VIE and its subsidiaries to transfer cash.Most of our cash is in Renminbi,and the PRCgovernment could prevent the cash maintained from leaving the PRC,restrict
160、 deployment of the cash into the business of our Company,oursubsidiaries,the VIE and the VIEs subsidiaries and restrict the ability to pay dividends to their respective shareholders,including our U.S.shareholders.Such restrictions are primarily related to the following aspects:(1)regulations in Chin
161、a currently permit payment of dividends only out of accumulated profits as determined in accordance with accountingstandards and regulations in China.PRC regulations also require our PRC subsidiaries to set aside at least 10%of their after-tax profits each yearto fund the statutory reserve and restr
162、ict dividend and shareholder distributions until the statutory reserve reach 50%of their respective registeredcapital.Our PRC subsidiaries may at their discretion allocate a portion of their after-tax profits to staff welfare and bonus funds in accordance withrelevant PRC rules and regulations.These
163、 reserve funds and staff welfare and bonus funds cannot be distributed as cash dividends.As a result,ourPRC subsidiaries are restricted in their ability to transfer a portion of their net assets to us in the form of dividends.Moreover,if the PRCsubsidiaries incur debt on their own behalf in the futu
164、re,the instruments governing the debt may restrict their ability to pay dividends or makeother distributions to us;(2)if any of our PRC subsidiaries incurs debt on its own behalf in the future,the instruments governing the debt may restrict its ability to paydividends or make other distributions to
165、us;and(3)our PRC subsidiaries generate primarily all of their revenue in Renminbi,which is not freely convertible into other currencies.As a result,anyrestriction on currency exchange may limit the ability of our PRC subsidiaries to use their Renminbi revenues to pay dividends to us.Underexisting PR
166、C foreign exchange regulations,payments of current account items,such as profit distributions and trade and service-related foreignexchange transactions,can be made in foreign currencies without prior approval from SAFE,by complying with certain procedural requirements.Therefore,our PRC subsidiaries
167、 are able to pay dividends in foreign currencies to us without prior approval from SAFE,subject to the conditionthat the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulations.However,approval from or registration with appropriate gove
168、rnmental authorities or commercial banks authorized by such authorities is required whereRenminbi is to be converted into foreign currency and remitted out of China to pay capital expenses,such as the repayment of loans denominatedin foreign currencies.Historically,in response to the persistent capi
169、tal outflow and the Renminbis depreciation against the U.S.dollar in 2016,the Peoples Bank ofChina,or the PBOC,and the State Administration of Foreign Exchange,or SAFE,have implemented a series of capital control measures,including stricter vetting procedures for China-based companies to remit forei
170、gn currency for overseas acquisitions,dividend payments andshareholder loan repayments.The PRC government may continue to strengthen its capital controls and our PRC subsidiarys dividends and otherdistributions may be subjected to tighter scrutiny.Furthermore,as the interpretation and implementation
171、 of these foreign exchange regulations hasbeen constantly evolving,it is unclear how these regulations,and any future regulations concerning offshore or cross-border transactions,will beinterpreted,amended and implemented by the relevant government authorities.For example,we may be subject to a more
172、 stringent review andapproval process with respect to our foreign exchange activities,such as remittance of dividends and foreign-currency-denominated borrowings,which may adversely affect our financial condition and results of operations.In addition,if we decide to acquire a PRC domestic company,we
173、cannot assure you that we or the owners of such company will be able to obtain the necessary approvals or complete the necessary filings andregistrations required by the foreign exchange regulations.This may restrict our ability to implement our acquisition strategy and could adverselyaffect our bus
174、iness and prospects.8Table of ContentsIn addition,there are limitations on our ability to settle amounts owed by the VIE under the relevant VIE agreements to us.We are entitled toreceive substantially all of the economic benefits of the VIE in consideration for the services provided by our WFOE,acco
175、rding to the VIE Agreements.However,the VIE agreements are not equivalent to equity ownership.For example,the contractually bound nominee shareholders of the VIE couldpotentially breach their contractual agreements with us by failing to fulfill their contractual obligations,failing to act in our int
176、erest,or acting to thedetriment of our interest.Moreover,as these nominee shareholders,rather than our WFOE and us,are the actual shareholders of the VIE,we are unableto independently exercise any rights as a shareholder of the VIE and force the VIE to distribute its earnings to us.In addition,the l
177、egality orenforceability of the VIE agreements have never been tested in a court of law in China.If any relevant contractual provisions were to ultimately be heldunenforceable by the PRC courts or other governmental authorities,such uncertainty could result in us facing a reduced ability or complete
178、 inability toreceive the economic benefits of the business operations of the VIE and its subsidiaries.These restrictions and limitations could limit our ability to settleamounts owed under the VIE agreements and our subsidiaries ability to pay dividends.The cash flows that have occurred between our
179、Company,our subsidiaries and the VIE and its subsidiaries are summarized as the following.The VIE,Burning Rock(Beijing)Biotechnology Co.Ltd.,generates and retains cash generated from operating activities and re-invests it in thebusiness activities conducted by the VIE and its subsidiaries.Unrelated
180、to those services as stipulated under the Exclusive Business OperationAgreement,the agreement that allows the Company to receive economic benefits from the VIE,our WFOE,Beijing Burning Rock Biotech Limited,charges service fee to the VIE for certain operating expenses that it bears on behalf of the V
181、IE for the business operations of the VIE and its subsidiaries.The service fee is determined at an amount subject to mutual negotiation and agreement between the WFOE and the VIE.Our WFOE charged servicefees of RMB64.9 million,RMB72.7 million and RMB191.6 million(US$27.8 million)to the VIE and recei
182、ved RMB25.3 million,RMB88.7 million andRMB398.5 million(US$57.8 million)of service fees from the VIE in 2020,2021 and 2022,respectively.We transferred RMB68.9 million,nil andRMB55.8 million(US$8.1 million)of financing proceeds to our WFOE,which was then transferred to the VIE as advance payments dur
183、ing the sameperiods.Additionally,we transferred nil,RMB315.0 million and RMB380.0 million(US$55.1 million)of financing proceeds to our WFOE and ourHong Kong subsidiary,which was then transferred to the VIE,in 2020,2021 and 2022,respectively.As the VIE has been loss making,it has not settledany amoun
184、t owed to the WFOE under the VIE Agreements.We may transfer cash proceeds raised from future overseas financing activities through our holding company,to our WFOE through capitalcontributions and shareholder loans.Our WFOE is expected to then transfer funds to the VIE and its subsidiaries to meet th
185、eir capital needs.The contractual arrangements may not be as effective as direct ownership in providing us with control over the VIE,and we may incur substantialcosts to enforce the terms of the arrangements.The VIE,its subsidiaries or shareholders could breach their contractual arrangements with us
186、 in waysincluding failing to fulfill their contractual obligations or taking other actions that are detrimental to our interests.If we had direct ownership of the VIEand its subsidiaries,we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIE,w
187、hich in turn couldimplement changes,subject to any applicable fiduciary obligations,at the management and operational level.However,under the current contractualarrangements,we rely on the performance by the VIE,its subsidiaries and its shareholders of their obligations under the contracts to exerci
188、se any controlover the VIE.The VIEs shareholders may have actual or potential conflicts of interest with us,and may not act in the best interests of our company.These shareholders may refuse to sign or breach,or cause the VIE to breach,or refuse to renew,the existing contractual arrangements we have
189、 withthem and the VIE.If any dispute relating to these contracts arises,we will have to enforce our rights under these contracts through the operations ofPRC law and arbitration,litigation and other legal proceedings and,therefore,will be subject to uncertainties in the PRC legal system.Therefore,ou
190、rcontractual arrangements may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership wouldbe.In addition,the Company and its investors may never directly hold equity interests in the businesses that are conducted by the VIE and itssubsidi
191、aries.Uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements,and these contractual arrangementshave not been tested in a court of law.The legal environment in the PRC is not as developed as in other jurisdictions,such as the United States.As aresult,u
192、ncertainties in the PRC legal system could limit our ability,as a Cayman holding company,to enforce these contractual arrangements and doingso may be quite costly.There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws,regulationsand rules
193、 regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the VIE,itsfounders and owners.It is uncertain whether any new PRC laws or regulations relating to the VIE structures will be adopted or if adopted,what theywould provide.If we
194、,the VIE or its subsidiaries are found to be in violation of any existing or future PRC laws or regulations,or fail to obtain ormaintain any of the required permits or approvals,the relevant PRC regulatory authorities would have broad discretion to take action in dealing withsuch violations or failu
195、res.In addition,Mr.Yusheng Han,our founder,chairman of the board of directors and chief executive officer holds 45.9%of theequity interests in the VIE as of March 31,2023.Mr.Han also has 54.9%of the aggregate voting power of our issued and outstanding share capital as ofMarch 31,2023 due to the disp
196、arate voting powers associated with our dual-class share structure.Accordingly,the enforceability of the variouscontracts described above by our company against the VIE is substantially dependent upon Mr.Han.If he fails to perform his obligations under thecontractual arrangements,we could be unable
197、to enforce the contractual arrangements that enable us to consolidate the VIEs operations and financialresults in our financial statements in accordance with U.S.GAAP as the primary beneficiary.If this happens,we would need to deconsolidate the VIEand its subsidiaries.The majority of our assets,incl
198、uding the necessary licenses to conduct business in China are held by the VIE and its subsidiaries.Asignificant part of our revenues is generated by the VIE and its subsidiaries.An event that results in the deconsolidation of the VIE would have amaterial effect on our operations and result in the va
199、lue of the securities diminish substantially or even become worthless.For a detailed description ofthe risks associated with our corporate structure,please refer to risks disclosed under“Item 3.D.Key InformationRisk FactorsRisks Related to OurCorporate Structure”in this annual report.9Table of Conte
200、ntsA.ReservedB.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsOur business,financial condition and results of operations are subject to various changing business,competitive,economic,political and socialconditions in China and wo
201、rldwide.In addition to the factors discussed elsewhere in this annual report,the following are some of the important factorsthat could adversely affect our operating results,financial condition and business prospects,and cause our actual results to differ materially from thoseprojected in any forwar
202、d-looking statements.Risk Factor SummaryRisks Relating to Our Business and Industry We are a cancer diagnostics company with a limited operating history,which may make it difficult to evaluate our current business andpredict our future performance.We have incurred net losses historically,and may not
203、 be able to achieve and maintain profitability.Failure to maintain significant commercial market acceptance for our cancer therapy selection products and services,or any futureproducts and services may harm our business and results of operations.We may be unable to develop and commercialize our earl
204、y cancer detection products,MRD products or new cancer therapy selectionproducts on a timely basis,or at all.If we fail to keep up with industry and technology developments in a timely and cost-effective manner,we may be unable to competeeffectively and our business and prospects could suffer.If our
205、 products or services do not perform as expected,our operating results,reputation and business could suffer.If we were to be sued for product liability or professional liability,we could face substantial liabilities that exceed our resources.If we cannot maintain or develop relationships with hospit
206、als and physicians,our results of operations and prospects could be adverselyaffected.We require substantial funding for our operations.If we cannot raise sufficient additional capital on acceptable terms,our business,financial condition and prospects may be adversely affected.We face risks related
207、to natural disasters,health epidemics,civil and social disruption and other outbreaks,which could significantlydisrupt our operations.In particular,the COVID-19 outbreak in China and worldwide has adversely affected,and may continue to affect,our business,results of operations and financial conditio
208、n according to the current COVID-19 policy in the short period.If we cannot compete successfully with our competitors,we may be unable to increase or sustain our revenue or achieve and sustainprofitability.Failure to manage our growth or execute our strategies effectively may adversely affect our bu
209、siness and prospects.Risks Relating to Government Regulations We are subject to extensive legal and regulatory requirements in China for our NGS-based products and services.Any lack of requisitecertificates,licenses or permits applicable to our business may have an adverse impact on our business,fin
210、ancial condition and results ofoperations.Failure to comply with existing or future laws and regulations related to the management of human genetic resources in China could leadto government enforcement actions,which could include civil or criminal fines or penalties,private litigation,other liabili
211、ties,and/oradverse publicity.Compliance or the failure to comply with such laws could increase the costs of,limit and cause significant delay in ourclinical studies and research and development activities,and could otherwise materially and adversely affect our operating results,businessand prospects
212、.10Table of ContentsRisks Relating to Our Corporate Structure If the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply withapplicable PRC laws and regulations,or if these regulations or their interpretations change,we could be s
213、ubject to severe penalties or beforced to relinquish our interests in those operations.Our contractual arrangements with the VIE and its shareholders may not be as effective in providing operational control or enabling us toderive economic benefits as a direct ownership of a controlling equity inter
214、est would be.We may lose the ability to use and enjoy assets held by the VIE that are critical to the operation of our business if the VIE declaresbankruptcy or becomes subject to a dissolution or liquidation proceeding.Risks Relating to Doing Business in the PRC Recent regulatory developments in Ch
215、ina may subject us to additional regulatory review and disclosure requirements,expose us togovernment interference,or otherwise restrict or completely hinder our ability to offer securities and raise capitals outside China,all ofwhich could materially and adversely affect our business,and cause the
216、value of our securities to significantly decline or becomeworthless.We are subject to many of the economic and political risks associated with emerging markets due to our operation in China.Adversechanges in the Chinese or global economic,political and social conditions as well as government policie
217、s could adversely affect ourbusiness and prospects.Geopolitical tensions have led to a worsening relationship between China and the United States and this adverse trend may continue todeteriorate,which could negatively affect our business and results of operations.Uncertainties in the interpretation
218、 and enforcement of PRC laws and regulations could limit the legal protections available to you and us.The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements andthe inability of the PCAOB to conduct inspections of our audi
219、tor in the past has deprived our investors with the benefits of suchinspections.Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect orinvestigate completely our current auditor.The delisting of the ADSs,or the threat of their b
220、eing delisted,may materially and adverselyaffect the value of your investment.Proceedings instituted by the SEC against the Big Four PRC-based accounting firms,including our independent registered publicaccounting firm,could result in financial statements being determined to not be in compliance wit
221、h the requirements of the Exchange Act.Risks Relating to Hong Kong There may be political risks associated with having business connection with Hong Kong.Risks Relating to The ADSs The trading price of ADSs has been and may continue to be volatile,which could result in substantial losses to investor
222、s.If we fail to meet the applicable listing requirements,Nasdaq or the London Stock Exchange,as applicable,may delist our ADSs fromtrading on its respective exchange in which case the liquidity and market price of our ADSs could decline and our ability to raise additionalcapital would be adversely a
223、ffected.If securities or industry analysts do not publish research or reports about our business,or if they adversely change their recommendationsregarding the ADSs,the market price for the ADSs and trading volume could decline.The sale or availability for sale of substantial amounts of ADSs could a
224、dversely affect their market price.Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage othersfrom pursuing any change of control transactions that holders of our Class A ordinary shares and the ADSs may view as benef
225、icial.Risks Relating to Our Business and IndustryWe are a cancer diagnostics company with a limited operating history,which may make it difficult to evaluate our current business and predict ourfuture performance.We commercially launched our first cancer therapy selection test in 2014 and started ge
226、nerating revenue in 2014.We launched our first MRDproduct,brPROPHET,in March 2022.Our limited operating history may make it difficult to evaluate our current business and predict our futureperformance.Any assessment of our profitability or prediction about our future success or viability is subject
227、to significant uncertainty.11Table of ContentsChinas NGS-based cancer therapy selection market is still in its early stage of development and rapidly evolving,and companies operating in thisindustry face a variety of risks.We may not have sufficient experience or resources to address risks frequentl
228、y encountered in this industry,whichinclude,among other things,our potential failure to:acquire and retain customers and increase adoption of our cancer therapy selection products and services by hospitals,physicians,patients,pharmaceutical companies and others in the medical community;timely respon
229、d to changing market conditions and keep up with evolving industry and technological standards and regulatorydevelopments;obtain and maintain the regulatory approvals required for us to further market and sell our cancer therapy selection products and servicesand commercialize our early cancer detec
230、tion products and services;manage our relationships with our suppliers,customers and research partners;protect proprietary technologies and intellectual property rights;and attract,train,motivate and retain research and development and other qualified personnel.If we are unsuccessful in addressing a
231、ny one or more of these risks,our business,financial condition and results of operations could be adverselyaffected.We have incurred net losses historically,and may not be able to achieve and maintain profitability.Although our revenue grew rapidly in recent years,we have historically incurred net l
232、osses.In 2020,2021 and 2022,we incurred net loss ofRMB407.2 million,RMB796.7 million,and RMB971.2 million(US$140.8 million)respectively.To date,we have financed our operations principallyfrom revenue generated from operations,proceeds from our initial public offering and concurrent private placement
233、 and equity contributions from ourshareholders.We have invested and expect to continue to invest significantly in the research,development,and sales and marketing of our products.As such,we may continue to incur losses in the future.We cannot predict the extent of these future losses,or when we may
234、achieve profitability,if at all.If weare unable to generate sufficient revenue from our business and control our costs and expenses to achieve and maintain profitability,the value of yourinvestment in us could be negatively affected.Failure to maintain significant commercial market acceptance for ou
235、r cancer therapy selection products and services,or any future products andservices may harm our business and results of operations.Our cancer therapy selection products and services contributed substantially all of our revenue for 2020,2021 and 2022.Although we are in theprocess of developing and c
236、ommercializing MRD and early cancer detection products,our cancer therapy selection tests will continue to account for asignificant portion of our revenue in the foreseeable future.Our ability to execute our growth strategy and become profitable will therefore depend uponthe continued and further ad
237、option of our cancer therapy selection products and services by hospitals and patients.Continued adoption and use of theseproducts and services will depend on several factors,including,among others:our ability to demonstrate among the medical community the clinical utility,superiority and the benefi
238、ts of our cancer therapy selectionproducts and services;our ability to further validate our cancer therapy selection technologies through clinical research and accompanying publications;the timing and scope of approval by the NMPA for our additional cancer therapy selection products;the prices we ch
239、arge for our cancer therapy selection products and services;our ability to maintain our laboratory certification,accreditation and regulatory approvals,including the NCCL PCR clinical test laboratorycertificate,the NCCL NGS laboratory certificate,the CAP accreditation,the CLIA certification,and comp
240、lete required inspections;and the impact of negative publicity regarding our or our competitors tests and technologies resulting from defects or errors.We cannot assure you that our cancer therapy selection products and services will continue to maintain or gain market acceptance,and any failureto d
241、o so would harm our business and results of operations.12Table of ContentsWe may be unable to develop and commercialize our early cancer detection products,MRD products or new cancer therapy selection products on atimely basis,or at all.We are developing and commercializing early cancer detection pr
242、oducts and MRD products and may develop and commercialize new cancertherapy selection products from time to time in the future.Developing early cancer detection,MRD and new cancer diagnostics products is a lengthyand complex process.New products may take time to commercialize,and their launch could
243、be delayed or may not be successful.Our product development process involves various risks,and we may not be able to develop and commercialize new early cancer detectionproducts,MRD products or cancer therapy selection products on a timely basis,or at all.A product candidate that appears promising i
244、n the early phasesof development may fail to reach the market for a number of reasons.For example:our product candidates may fail to demonstrate clinical utility,or the development process may produce negative or inconclusive results,and we may decide,or regulators may require us to conduct addition
245、al clinical trials or we may decide to abandon our developmentprograms;our employees,or third-party clinical investigators,medical institutions and contract research organizations,may fail to comply with theircontractual duties or obligations or meet expected deadlines,and if the quality,completenes
246、s or accuracy of the clinical data they obtainare compromised due to any failure to adhere to our clinical protocols or for other reasons,our clinical trials may have to be extended,delayed or terminated;we may fail to obtain approvals for our product candidates from relevant regulatory authorities;
247、and failure to generate additional data and insights from our existing products to advance the research and development of new products asquickly,or at all.In addition,our competitors may develop and commercialize competing products faster than we are able to,in which case our results of operationsc
248、ould be adversely affected.If we fail to keep up with industry and technology developments in a timely and cost-effective manner,we may be unable to compete effectively andour business and prospects could suffer.Chinas NGS-based cancer therapy selection market is characterized by rapid changes,inclu
249、ding technological and scientific breakthroughs,increasing amounts of data,frequent introductions of new tests,constant emergence of alternative diagnostic methods,and evolving industry standards.If we are not able to keep pace with these advances and increased customer expectations as a result of t
250、hese advances and capture new marketopportunities that develop as a result of these advances,our proprietary technologies could be rendered obsolete,our existing products and services andproducts and services we are developing could be rendered less clinically effective,and our future operations and
251、 prospects could suffer.To remaincompetitive,we must continuously upgrade our existing products and services and launch new products and services,to keep pace with thesedevelopments.We cannot assure you that these efforts will be successful.In addition,we must expend significant resources in order t
252、o continuously upgrade our existing products and services or launch new ones to keeppace with industry and technological advances.We may never realize a return on investment on these efforts,especially if the improved or new productsand services fail to perform as expected,in which case our business
253、,financial condition and results of operations could be adversely affected.If our products or services do not perform as expected,our operating results,reputation and business could suffer.Our success depends on the market confidence that we can provide reliable,high-quality products and services,in
254、cluding those for cancer therapyselection,MRD and early cancer detection,that will provide physicians with real-time clinically actionable diagnostic information.However,there is noassurance that our current and future products and services,including our early cancer detection tests currently under
255、development,will consistentlyperform as expected,if at all.Our tests may fail to accurately detect gene variants or incompletely or incorrectly identify the significance of genomicalterations,or contain other errors or mistakes due to a variety of reasons(such as malfunction of our laboratory equipm
256、ent and degraded liquid biopsyor tissue samples provided by our delivery service providers),which could either delay treatments or incur unnecessary medical expenses to people onwhom the tests are performed.In addition,inaccurate results or misunderstandings of,or inappropriate reliance on,the diagn
257、ostic information ourcurrent and future tests provide could lead to,or be associated with,side effects or adverse events in patients who use our tests,including treatment-related death,and could lead to termination of our services or claims against us.Any such inaccurate diagnostic results,or percep
258、tion thereof,couldfurther subject us to claims or lawsuits brought by people taking our tests and their families.Any product defects or other failure of our existing productsand products currently under development may result in adverse or negative publicity,lost revenue,rising insurance premium,and
259、 significant warrantyand other expenses and could have a material adverse impact on our operation,business prospects,financial condition and results of operations.13Table of ContentsIf we were to be sued for product liability or professional liability,we could face substantial liabilities that excee
260、d our resources.We could face product liability claims should someone allege that our products or services identified inaccurate or incomplete informationregarding the genomic alteration of the tumor or malignancy analyzed,reported inaccurate or incomplete information concerning the available therap
261、iesfor a certain type of cancer or otherwise failed to perform as designed.A claimant could allege that our test results caused unnecessary treatment orother costs or resulted in the patient missing the best opportunity or timing for treatment.A patient could also allege other mental or physical inj
262、ury orthat our tests provided inaccurate or misleading information concerning the diagnosis,prognosis or recurrence of,or available therapies for,his or hercancer.We may also be subject to liability for errors in,a misunderstanding of or inappropriate reliance upon,the diagnostic information our tes
263、tsprovided.The tense physician-patient relationship in China could also expose us to an increased risk of potential liability claims.A product liability orprofessional liability claim could result in substantial damages and be costly and time-consuming for us to defend and could divert our managemen
264、tsattention.Similar to other Chinese companies,we do not carry product liability or professional liability insurance.As the insurance industry in China is at arelatively preliminary stage of development compared to more developed markets such as the United States,insurance companies in China general
265、lyoffer a limited selection of product liability and professional liability insurance policies and it is often difficult to secure suitable product liability andprofessional liability insurance coverage at reasonable rates in China.Any product liability or professional liability claim brought agains
266、t us,with orwithout merit,could increase our insurance rates or prevent us from securing insurance coverage.Additionally,any product liability or professionalliability lawsuit could damage our reputation,or cause our business partners to terminate existing agreements with us and seek other business
267、partners,or cause us to lose our current or potential customers.Any of these developments could adversely impact our results of operations and businessprospects.If we cannot maintain or develop relationships with hospitals and physicians,our results of operations and prospects could be adversely aff
268、ected.We collaborate with hospitals and physicians across China in many aspects of our business,and our success in part depends on our ability tomaintain our relationships with our existing partner hospitals and physicians and continue to build new relationships with additional hospitals andphysicia
269、ns.Central laboratory collaboration.Currently,we primarily collaborate with hospitals and physicians under the central laboratory model,where thecancer patients treating physicians order our tests for the patients during the diagnostic process,have the patients liquid biopsy or tissue samplesshipped
270、 to our laboratories for testing and then design treatment plans based on our test results.Since our inception,over 6,004 physicians from 802hospitals across China had ordered our tests.To generate demand,we will need to continue to educate physicians at an increasing number of hospitalson the clini
271、cal utility,benefits and value of our tests through clinical trials,published papers,presentations at scientific conferences and one-on-oneeducation by our in-house sales force.We may need to hire additional sales and marketing,research and development and other personnel to support thisprocess.If t
272、he physicians currently using our tests services stop ordering our tests or order fewer tests from us for any reason,or if we fail to convincephysicians at new hospitals to order our tests,we will likely be unable to generate demand for our tests in sufficient volume for us to achieveprofitability.I
273、n-hospital collaboration.We are also actively expanding our collaboration with hospitals under the in-hospital model.Under this model,wepartner with hospitals to establish in-hospital laboratories so that the partner hospitals can conduct cancer therapy selection tests on their own using ourreagent
274、kits.As of December 31,2022,we had partnered with 77 hospitals under the in-hospital model.Any deterioration or termination of ourrelationships with these partner hospitals could result in temporary or permanent loss of our revenue.In addition,we will need to continue to advocate the clinical utilit
275、y,benefits and value of our tests in order to enter into collaboration withadditional hospitals under the in-hospital model.Even if we have convinced the new hospitals to partner with us,establishing in-hospital laboratorieswith hospitals in China involves a lengthy and costly process,including goin
276、g through tender procedures,the outcome of which is subject touncertainties,and complying with the respective hospitals operating protocols.If we fail to enter into collaboration with additional hospitals under thein-hospital model in a timely and cost-effective manner,or if due to regulatory change
277、 or any other reasons,our current partner hospitals terminate theircurrent collaborations with us,our business and prospects could be adversely affected.Furthermore,depending on our partner hospitals clinical needs and budgets for cancer therapy selection products and services,our revenues fromin-ho
278、spital business have fluctuated,and may continue to fluctuate from quarter to quarter.Clinical collaboration.We have obtained the NMPA approval for two of our NGS reagent kits and in the future we may from time to time seekthe NMPA approval for additional products.In addition,we have one early cance
279、r detection product that has been granted Breakthrough DeviceDesignation by the FDA and is currently under review for approval.The NMPA approval and FDA approval involve,among other things,successfulcompletion of clinical trials for these products.We may rely on our partner hospitals to obtain suffi
280、cient data and samples to cost-effectively and timelyperform these clinical trials.If we fail to establish or maintain clinical collaboration with our partner hospitals,our business and results of operationsmay be harmed.14Table of ContentsWe require substantial funding for our operations.If we cann
281、ot raise sufficient additional capital on acceptable terms,our business,financialcondition and prospects may be adversely affected.We require substantial capital to fund our existing operations,commercialize new products,expand our business and pursue strategic investments.In particular,we require s
282、ubstantial capital to:advance our early cancer detection technologies and develop early cancer detection product candidates;increase our sales and marketing efforts to drive market adoption of our products and services and address competitive developments;seek regulatory and marketing approvals for
283、our tests;maintain,expand and protect our intellectual property portfolio;hire and retain additional personnel,such as scientists and sales and marketing personnel;develop,acquire and improve operational,financial and management information systems;add equipment and physical infrastructure to suppor
284、t our research and development programs;finance general and administrative expenses;and operate as a public company.Based on our current business plan,we believe our cash and cash equivalents,together with our cash generated from financing activities,ourinitial public offering and private placement
285、will be sufficient to meet our current and anticipated needs for general corporate purposes for at least thenext 12 months.If our available cash balances and current and anticipated cash flow from operations are insufficient to satisfy our liquidityrequirements,in particular,for the development and
286、commercialization of our products,we may seek to obtain further funding through public or privateequity offerings,debt financings or other sources.Further financing may not be available to us on acceptable terms,or at all.If we fail to raise capital as and when needed it would have a negativeimpact
287、on our financial condition and our ability to pursue our business strategy.In addition,if we raise funds by issuing debt securities or incurringadditional borrowings,the terms of debt securities issued or borrowings could impose significant restrictions on our operations,and we may be unable torepay
288、 the indebtedness when due.If we raise funds by issuing equity securities,your investment in our company could be diluted.We depend on third-party suppliers and service providers for different aspects of our business.If these suppliers and service providers can no longerprovide satisfactory products
289、 or services to us on commercially reasonable terms,our business and results of operations could be adversely affected.We depend on third parties for different aspects of our business,such as supplying sequencers,reagents and other laboratory equipment andmaterials,and collecting and delivering samp
290、les for our tests.Selecting,managing and supervising these third-party suppliers and service providersrequires significant resources and expertise.Poor performance by these third parties,including their failure to provide services or products according toapplicable legal and regulatory requirements,
291、the terms of our contracts or otherwise below standard,could significantly and negatively affect the qualityof our cancer therapy selection tests and damage our reputation.For example,we rely on third-party delivery service providers to transport liquid biopsyand tissue samples to our laboratory.Dis
292、ruptions in such delivery services,whether due to labor disruptions,bad weather,natural disaster,terrorist actsor threats or for other reasons could adversely affect specimen integrity and our ability to process samples and conduct tests in a timely manner and toservice our customers satisfactorily,
293、and ultimately our reputation and our business.In addition,if we are unable to continue to obtain expedited deliveryservices on commercially reasonable terms,our operating results may be adversely affected.In addition,the service or cooperative agreements we have with third-party suppliers and servi
294、ce providers are generally not on an exclusive basis.If these third parties do not continue to maintain or expand their cooperation with us,we would be required to seek new substitutes for these third-partymaterial or service providers,which could disrupt our operations and adversely affect our resu
295、lts of operations.15Table of ContentsIf we cannot maintain or develop relationships with our research partners,the market adoption and endorsement of our products and services couldsuffer,which could in turn reduce our revenue prospects.Currently,we have wide academic collaborations with oncology ke
296、y opinion leaders,who conducted clinical trials and research studies on earlycancer detection and cancer targeted therapies and immunotherapies using our products.We believe our relationships with oncology key opinion leaders,as well as the resulting peer-to-peer interaction they generated,have been
297、 instrumental in raising the awareness of our technology platform,endorsingthe high quality of our R&D and product development capabilities and driving adoption of our products.In addition,we collaborate with pharmaceuticalcompanies who employ cancer therapy selection using our products and services
298、 to help develop new drugs for targeted therapies and immunotherapieson various types of cancers.We believe their rigorous standards for the consistency and accuracy of cancer therapy selection results provide validationand endorsement for our technology platform and our products.Our future success
299、depends in part on our ability to maintain these relationships and to establish new relationships.Many factors have thepotential to impact such collaborations,with both key opinion leaders and pharmaceutical companies,including the type of biomarker support requiredand our ability to deliver it,phar
300、maceutical companies satisfaction with our products or services,and our ability to pass the periodic or randominspections of our pharmaceutical company partners,and other factors that may be beyond our control.Furthermore,our research partners may decide todecrease or discontinue their use of our pr
301、oducts and services due to changes in their research focus;pharmaceutical companies may decide to cease orchange their new drugs development plans due to various reasons,such as failures in their clinical trials,financial constraints,or utilization of internaltesting resources or tests performed by
302、other parties,or other circumstances outside of our control.We cannot assure you that such existing relationshipswill continue,or if we establish new relationships with other key opinion leaders and pharmaceutical companies,the resulting relationship will besuccessful or that academic research and c
303、linical studies conducted as part of the collaborations will produce successful outcomes.We rely on a limited number of suppliers for some of our laboratory equipment and supplies and may not be able to find replacements orimmediately transition to alternative suppliers.We source sequencers,reagents
304、 and certain other laboratory supplies used in our laboratory operations from a limited number of suppliers.Oursuppliers are typically trading companies that procure laboratory supplies from a variety of manufacturers.Our laboratory operations may be interruptedif we encounter delays or difficulties
305、 in securing these supplies,or if we become unable to procure supplies from any of these suppliers due to their lackof required licenses,permits or certifications.If we cannot timely obtain an acceptable substitute,our business,financial condition,results of operationsand reputation could be adverse
306、ly affected.We believe that there are a number of replacement suppliers that are capable of supplying all of the sequencers,reagents and other laboratorysupplies necessary for our laboratory operations.However,the use of laboratory equipment and supplies furnished by any replacement suppliers mayreq
307、uire us to alter our laboratory operations.Transitioning to a new supplier may be time consuming and expensive,result in interruptions in ourlaboratory operations or require that we revalidate our cancer therapy selection test products and services.There can be no assurance that we will be ableto br
308、ing the equipment and supplies supplied by these replacement suppliers online and revalidate them without experiencing interruptions in ourworkflow.In addition,there can be no assurance that replacement suppliers will meet our quality control and performance requirements.If we encounterdelays or dif
309、ficulties in securing,reconfiguring or revalidating the laboratory equipment and supplies we require for our laboratory operations,ourbusiness,financial condition,results of operations and reputation could be adversely affected.If we are unable to support the demand for our current or future product
310、s and services,including ensuring that we have adequate capacity to meetincreased demand,our business could suffer.Since our inception,we have experienced rapid growth,and we anticipate further growth in our business operations.Our growth could strain ourorganizational,administrative and operational
311、 infrastructure.As the sales volume of our products and services grows,we will face increased demands onour capacity and efficiency for sample intake,testing results analysis and other laboratory operations,quality control,customer service,and generalworkflow management processes.To maintain the qua
312、lity and expected turnaround time of our tests and effectively meet increased demand,we must continue to improve ouroperational,financial and management controls and hire,train and manage additional qualified scientists,laboratory personnel and sales and marketingpersonnel.Failure to do so could adv
313、ersely affect our business,financial condition and results of operations.For example,if we encounter difficulties inscaling our operations as a result of quality control and quality assurance issues,we will likely experience reduced sales of our cancer therapy selectiontests,increased repair or re-e
314、ngineering costs and increased expenses due to switching to alternate suppliers,any of which would adversely affect ourresults of operations.We face risks related to natural disasters,health epidemics,civil and social disruption and other outbreaks,which could significantly disrupt ouroperations.In
315、particular,the COVID-19 outbreak in China and worldwide has adversely affected,and may continue to adversely affect,ourbusiness,results of operations and financial condition.16Table of ContentsWe are vulnerable to social and natural catastrophic events that are beyond our control,such as natural dis
316、asters,health epidemics,and othercatastrophes,which may materially and adversely affect our business.Since December 2019,a novel strain of coronavirus,or COVID-19,has becomewidespread in China and around the world.In March 2020,the World Health Organization declared the COVID-19 a pandemic,and the C
317、OVID-19,including its variants,has continued to spread across the globe.Since the beginning of 2020 and up to the date of this annual report,China and manyother countries have taken various restrictive measures to contain the virus spread,such as quarantines,travel restrictions and home office polic
318、ies.Inresponse to this pandemic,hospitals and physicians across China focused their efforts on treating COVID-19 patients and prioritized resources towardcontaining the virus,resulting in many diagnostic procedures and cancer therapy selection testing being deferred.In particular,cities such as Shan
319、ghaiand Beijing,where we generate a significant portion of our revenue,also experienced quarantines,travel restrictions,and temporary closure ofbusinesses and facilities as a result of COVID-related restrictions.Relevant governmental authorities in various regions in China further modified,relaxed o
320、r re-imposed COVID-related restrictions based on their assessment of the severity of resurgences of COVID-19.As a result,the demand forour products and services under both our central laboratory model and in-hospital model decreased and fluctuated accordingly from time to time,whichadversely affecte
321、d our business operations and financial performance in various periods from the beginning of 2020 to the date of this annual report.Forexample,while our business performance experienced robust recovery in the first quarter of 2022,our business volume was again significantly impactedby COVID-related
322、restriction in the second quarter of 2022,primarily due to an out-sized COVID-19 impact in Shanghai.In the third and fourthquarters of 2022,our business growth resumed as the COVID-19 impact started to lessen and the Chinese government significantly loosened itszero-COVID policy in December 2022.In
323、2022,27,353 patients took our tests,compared to 28,199 patients in 2021,while our reagent kit sales topartner hospitals increased year over year.Our revenues increased by 10.9%from RMB507.9 million in 2021 to RMB563.2 million(US$81.7 million)in 2022.Our gross profit increased by 4.4%from RMB364.1 mi
324、llion in 2021 to RMB380.0 million(US$55.1 million)in 2022.While local governments across China have gradually lifted the restrictive measures under Chinas Zero-COVID policy and Chinas rollback of itsstrict anti-COVID-19 measures is expected to boost its domestic economic growth,it cannot be guarante
325、ed that China will quickly and sustainablyrecover to previous levels of economic growth and demand for our products and services could correspondingly recover.In particular,as China rapidlyadjusted its pandemic controls,the number of COVID-19 cases has escalated rapidly.Although it is difficult to t
326、race the impact through Chinas officialstatistics,the impact on Chinas economy may be significant.Furthermore,higher case level in China or other regions could result in new variants of thedisease,which could again result in higher case numbers and further stress nations vaccine and other mitigation
327、 strategies,which could again affecteconomies globally.The extent to which the COVID-19 outbreak impacts our business,results of operations and financial condition will depend onmany factors beyond our control,including the extent of future resurgences of the disease and its variants,vaccine distrib
328、ution and other actions inresponse to the virus or to contain its impact,and we are closely monitoring its impact on us.Our business,results of operations,financial conditionsand prospects could be materially adversely affected to the extent that COVID-19 harms the Chinese and global economy in gene
329、ral,and the tradingprice of our ADSs may be adversely affected.To the extent the COVID-19 pandemic and the outbreak of other health epidemics adversely affect ourbusiness,results of operations,financial conditions and prospects,they may also have the effect of heightening many of the other risks des
330、cribed in thissection.If we cannot compete successfully with our competitors,we may be unable to increase or sustain our revenue or achieve and sustain profitability.With the development of NGS and cancer genotyping,Chinas NGS-based cancer therapy selection market has become increasingly competitive
331、,and we expect this competition to intensify further in the future.Our principal competition comes from other NGS-based cancer therapy selectioncompanies in China.As we gradually commercialize our MRD products and cancer early detection products,we also expect to face competition fromplayers in the
332、relevant fields.Some of our existing and potential future competitors may have longer operating histories,larger customer bases,moreexpansive brand recognition and deeper market penetration,substantially greater financial,technological and research and development resources andselling and marketing
333、capabilities,and more favorable terms from suppliers.As a result,they may be able to respond more quickly to changes incustomer requirements or preferences,develop faster,better and more expansive advancements for their technologies and tests,create and implementmore successful strategies for the promotion and sale of their tests,adopt more aggressive pricing policies for their tests,secure suppli